Marijuana: Lawsuit claims special pot taxes are illegal and unconstitutional

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Last year, attorney Rob Corry, who helped author Amendment 64, the 2012 law that legalized limited recreational marijuana sales, campaigned against cannabis taxation measures by, among other things, co-hosting rallies featuring free joints.

Corry's efforts fell short at the ballot box, so now he's trying his luck at the courthouse. In a complaint filed this week in Denver District Court, Corry and other plaintiffs argue that special pot taxes should be eliminated and all the money paid to date be refunded.

The entire document is below, along with a summons to defendants such as Governor John Hickenlooper and Denver mayor Michael Hancock. (Plaintiffs include marijuana activist Kathleen Chippi and Miguel Lopez, founder of the Denver 4/20 rally.) But here's the synopsis of the complaint:

Plaintiffs, through undersigned counsel, hereby petition and apply for injunctive and declaratory relief, and for a refund and damages, against Defendants and their collection and enforcement of illegal and unconstitutional Marijuana Taxes, as provided in Colorado Proposition AA and Denver Referred Question 2A.

It's important to note at the outset that Corry isn't against taxes on marijuana. However, he believes cannabis should be "taxed just like any other product -- no more and no less. There should not be specific marijuana taxes."

This view would seem to contradict Amendment 64, which calls for an excise tax of up to 15 percent. However, he says, "there's nothing in Amendment 64 or the campaign for it that ever mentioned a separate sales tax on top of the excise tax. Basic economics tells you that a 15 percent excise tax is already high, and a sales tax that's directly assessed on the consumer raises costs astronomically when you couple them with the excise tax. But the government has expanded that narrow mandate to create a much more massive tax burden."

The special pot-tax provisions are attacked on a number of fronts that Corry says are "independent causes of action -- they stand alone." Here's his synopses of each one.

"The primary cause of action is based on the Timothy Leary case before the U.S. Supreme Court," he says, referring to 1969's Leary v. U.S. "That case struck down the Marihuana Tax Act of 1937 after Leary successfully argued to the court that payment of a marijuana tax was a violation of the Fifth Amendment right to avoid self-incrimination.

"The second claim is based on the public-policy argument that state and local governments cannot collect taxes expressly on activity that is federally illegal," he continues. "So the taxes are illegal.

"Our third claim," he goes on, "has to do with Amendment 64 itself. The purpose of Amendment 64 was to tax marijuana like alcohol -- and there's also a component in Amendment 64 that prohibits any regulation that is 'unreasonably impracticable.' And this is that. The taxes are so high that it makes it impracticable to run a reasonable business.

"Amendment 64 set out to end prohibition, the black-market trade in Colorado, and transform it from an unregulated, underground market into a regulated, legitimate, tax-paying market. But if you set taxes too high, you empower an underground market. So high taxation is 'prohibition lite.' And even as the state government has made it a criminal offense not to pay marijuana taxes, the federal government has made it a crime to pay the taxes. That puts individuals between a rock and a hard place."

Continue for more about the marijuana-taxation lawsuit, including three original documents and more of our interview with attorney Rob Corry. Regarding the fourth claim in the complaint, "it's based on equity," Corry says. "Equity is a separate legal concept that allows plaintiffs to potentially recover moneys when they don't have a legal remedy because it would be inequitable for the defendants to keep the money. And we're arguing that since state and local governments are retaining money from illegal activities, they ought to refund all of it."

According to Corry, he was inspired to file the complaint due in part to "the back and forth we had with Denver over the 4/20 rally, when Denver claimed this virtually robotic devotion to every conceivable legal technicality regarding public consumption. But Denver was missing its own legal non-compliance with a far more serious law -- i.e. profiting from the illegal sale of marijuana."

Another motivation, Corry notes, were "money laundering indictments that came down against VIP Cannabis" and other businesses raided by federal agents last year. "The federal government is using tax documents as the core of its case against these individuals," including Hector Diaz, "and that's caused fear and trepidation in our community. We think it's pretty clear from this indictment that the federal government could have brought the same charges against every licensed shop, grow facility and infused products manufacturer in the entire state."

Below, see the aforementioned complaint and summons, as well as the indictment of Hector Diaz to which Corry alludes. Note that the complaint includes links to numerous articles and posts, with Westword among the news agencies cited.

No Over Taxation v. John Hickenlooper Complaint

No Over Taxation v. John Hickenlooper Summons

Hector Diaz Federal Indictment

Send your story tips to the author, Michael Roberts.

More from our Marijuana archive circa September 2013: "Photos: Anti-pot-tax rally attracts big crowd for free joints."

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